Sainsbury’s pitch to the Competition and Markets Authority didn’t work the first time, so here comes chief executive Mike Coupe with another plea. His big reveal was a figure for the price savings to be delivered to customers if Sainsbury’s is allowed to merge with Asda. This number was previously deemed too sensitive to be allowed out in public but Sainsbury’s is now desperate. Shoppers would, apparently, be better off by £1bn in the third year after the deal.
Since the CMA already had this projection (it was only everybody else who had to make do with wishy-washy words “about 10% off everyday items”), the pointy-heads at the competition regulator probably won’t be swayed one jot.
Nor should they be. Coupe’s accompanying boast that Sainsda is “happy to be held to account for delivering on this [£1bn] commitment” needs a couple of qualifications. First, the people checking the constantly changing prices would be auditors appointed by, and paid by, the merger duo. Second, non-compliance would appear to carry no penalty. If, say, only £700m of the £1bn arrived, Coupe, or more likely his successor, would merely be obliged to be embarrassed. Nobody is talking about legally enforceable undertakings.
Sainsbury’s may be on firmer ground in arguing the CMA made a few basic errors when compiling data on local areas in which competition could be lessened. If the watchdog really has mistaken a few non-food Asda Living stores for Asda supermarkets the error will have to be corrected. But one doubts such tweaks will seriously alter the CMA’s “extensive concerns” about the proposed deal.
The creation of Sainsda would permanently reshape a UK grocery market that is usually regarded as one of the most competitive in the world: the would-be partners plus Tesco would have a combined share of about 60%. So, even if the CMA’s worries about “higher prices, reduced quality and choice, and a poorer overall shopping experience across the UK” could be allayed for the first three years, years four to 40 also matter.
It’s no use the would-be partners grumbling about future threats from Amazon; the CMA has to look at today’s market and Amazon is currently irrelevant in food in the UK. Coupe is obliged to put up a fight, but there was a whiff of going through the motions about this latest episode. Barring an astonishing U-turn on the part of the CMA, this deal is dying – still.
An embarrassing loss for Lloyds
When Lloyds Banking Group chief executive António Horta-Osório gets round to explaining to shareholders why he required his uniquely generous pension benefits, he could also tell them how the bank lost its bitter quarrel with Standard Life Aberdeen.
To recap: when the Scottish duo merged in 2017, Lloyds cried foul and said £100bn of its clients’ funds, managed by Aberdeen, couldn’t possibly live under the same roof as Standard Life. The latter, argued Lloyds, was a direct competitor in pensions with its own Scottish Widows operation. Notice to ditch the management contract was served.
An arbitration panel has now decided that Lloyds had no right to terminate. The funds will move anyway to Schroders and BlackRock but Lloyds, almost certainly, will have to pay compensation to Standard Life Aberdeen. Since the yet-to-be-paid fees on a contract that runs until 2022 are reckoned to amount to £330m, Lloyds is looking at large bill even after it has chiselled off a few chunks via negotiation.
Even £200m, or thereabouts, is large sum to lose down the back of the sofa. This affair ought to be embarrassing in the boardroom since termination rights were, presumably, defined in the contract. This is a bad one for Lloyds to lose.
Rail review misses the HS2 in the room
“For me, success is defined by our ability to design a system that can make choices and trade-offs.” Sadly, Keith Williams, the former British Airways chief reviewing the operation of the UK’s railways, wasn’t talking about HS2, the high-speed line most in need of a cold assessment of trade-offs.
Others, though, have grasped the point. The New Economics Foundation is merely the latest thinktank to argue that HS2 should be scrapped and its £56bn budget allocated to the existing network and local projects. It calls HS2 an example of “trickle-down transport policy” that will deepen the north-south economic divide.
HS2 got only a couple of passing references (both positive) in Williams’ half-time speech, but his brief is presumably tightly defined. Yet any root-and-branch review of how to improve the rail network should consider how the vast sums being allocated to HS2 are distorting investment. Without HS2, possibilities would open up.
